“Remedy the shortcomings of traditional finance and decentralized finance by synthesizing custodial and non-custodial assets.”
Virtual assets in the Defi market is making transparent transaction by using the characteristics that it is impossible to be tampered. However, it is limited to make transactions in the real economy, as the actual custodial assets of traditional finance.
However, as various financial services such as retail payments, overseas remittances, etc of traditional finance have become Defi-lization, we dreamed of building a decentralized and optimal payment ecosystem.
In the past, for example, both mobile phone voice calls and text messaging services were charged services using analog, GSM, and CDMA networks. However, with the introduction of smartphones, social media apps that use the Internet networks have increased because the internet network speed developed to the level of LTE, so text messaging, voice calls, and video calls are available at no charge through Kakao Talk. This influenced existing systems such as unlimited text messaging or unlimited voice phone plans of KRW 20,000. Just as mobile phones are mainly used for Internet networks in CDMA networks, the development of networks is similar to that of decentralized finance in centralized finance.
Examples of the ideal new Defi market with an optimal payment ecosystem are the followings:
After creating a virtual wallet, token assets in consumers’ virtual wallets can be traded and settled directly in the real economy.
Cryptocurrency transactions are available for people who cannot deal with their bankbook in the traditional financial sector.
Available to be used as a reliable settlement method in the economic life and transactions of developing countries with unstable economic conditions and monetary value.
Fast transactions in trade between countries even with large transaction amounts are available.
People of different nationalities can use it as a means of international transaction.
However, the current Defi form of non-custodial assets has restrictions in utilization because they are not legal assets such as fiat currency, which are certified by the country or central bank. To overcome these restrictions, the connection to the custodial assets that are the basis of value and deposit is required.
For this, CenterPrime introduces hybrid neuron assets that synthesize custodial assets of the traditional financial with non-custodial assets in Defi. CenterPrimes’ hybrid neuron assets have two characteristics as the followings:
1. The Synthesis of Traditional Finance Investment and Decentralized Finance Staking = Interest Rate Higher than Existing Interest Rate
As the investment in traditional finance, it is possible to generate profits through the investment through staking in Defi. Staking means fixing a certain amount of cryptocurrency with a stake. In other words, it is a service that entrusts a certain amount of cryptocurrency to be used for the operation of the blockchain network and receives compensation in return, and it is a concept similar to giving interest when saving to a bank.
For example, in traditional finance, if an investor invests USD 1 million in a startup in Manhattan on October 14, 2019, and if the return on investment is 2.3% and the investment period is one year, the investor’s return on October 14, 2020, will be $23,000.
In traditional finance, if you invest in dollars, you get a return on your investment in dollars after a certain period of time. However, in staking, investing in cryptocurrency you gain the profits in the form of cryptocurrency and earning profits from staking, that is, earning interest, in other words, is called Farming.
For example, if the holder holding the cryptocurrency staked 10 AAA tokens on October 14, 2019, if the staking profit is 2.3% and the staking period is one year, then the AAA token that the holder will get will be 2.3 AAA tokens on October 14, 2020. The difference between investment and staking in traditional finance is the form of receiving profits. In traditional finance, if you invest in dollars, you will receive in dollars, but in the case of staking, if you invest in dollars, you can still receive profits in tokens.
Staking of hybrid neuron assets is a form of neuron asset staking in the form of synthesis of custodial and non-custodial assets, and the gains can make profits of fiat currency and tokens simultaneously, not just fiat currency or tokens. The reasons for this are the following.
The reason is that both assets are doing investment and staking at the same time. Staking with the synthetic asset token suggested by CenterPrime will result in greater profits because the interest on the custodial asset and the non-custodial asset can be farming at the same time.
2. Non-Custodial Assets that can Contain the Value of Traditional Finance Assets
The current online economy has the form of trading by stating the fiat currency of traditional financial online in the form of numbers. However, e-commerce based on traditional financial is more restrictive than Defi in the presence of a central bank or government intermediary, and it also has to go through strict procedures for stability and reliability.
For example, when a consumer makes a payment with Samsung Pay, Apple Pay, or credit card, a payment agency called Inicis first settles the payment to the seller and then charges the customer’s bank account with a fee. At this time, it has disadvantages that the transaction itself is impossible such as that the consumer has to pay a fee and the seller cannot trust the consumer without Inicis.
Also, since you have to pay a fee for each payment, the total cost you pay is inefficient because it adds to the sum of the fees. The absence of an intermediary, which is an advantage of the Defi economy is required. In addition, it is also necessary for the seller and the consumer to verify the reliability of each other through transactions through blockchain cryptocurrency. In other words, it means that it is necessary to connect the non-custodial assets of Defi with the custodial assets.
Defi is mainly based on speculation, not on the basis of asset value or evidence. Also, since it is an asset with no basis for its value, it is not often used for actual settlements or transactions. In addition, the gas fee, which is a fee incurred for trading tokens, is too high, so tokens cannot be used in practice. In some cases, the gas fee (commission) is higher than the price of the token being traded. Also, if a consumer shows a mobile phone to purchase a product at a store run by a person who does not know Bitcoin or cryptocurrency and says, “I’ll pay with Bitcoin,” how would the operator of the store react to the number in the mobile phone, not in fiat currency or custodial assets?
Hybrid neuron assets extend usability by remedy the disadvantages of traditional finance and Defi mentioned above. In addition, since non-custodial assets with high prices require such things as currency stabilization of traditional finance for practical use, the consolidation of the custodial assets enables price stabilization. It is similar to the currency stabilization of traditional finance. In other words, the inefficiency and high price of gas fees can be compensated by connecting traditional financial custodial assets.
Hybrid neuron assets are similar in that they are also used in the real economy, such as online payments in traditional finance, but there are differences in settlement methods. In the case of trading online as a non-custodial asset, the transaction is first made with the custodial asset, and it is the same part as the online settlement in traditional finance. However, the difference here is that if sellers and consumers trade hybrid neuron assets without intermediaries, there is no fee, and the role of intermediary will be replaced by a settlement provider called Payment Gateway (PG). In addition, in the case of non-custodial assets based on custodial assets, it is common for non-custodial assets to be deducted, and the final settlement is the same as the settlement of the custodial asset because the final payment is also a custodial asset. Payment Gateway (PG) will be published in the next article.
The CenterPrime project uses a Hyperledger private chain to share an open banking API to apps, connecting centralized finance to decentralized finance. Also making smart pairing data for loan, remittance, exchange, payment, and exchange rate information possible to be included in fintech oracle networks.